Marco Island's audit committee delves into city's risk and financials

CHERYL FERRARA

12:22 PM, Dec 18, 2013

Leanne Cross and Jeff Gerhard of Maudlin & Jenkins explain progress being made on the City of Marco Island’s annual financial audit during a meeting of the Audit Advisory Committee on Tuesday. The independent firm was hired by the city to complete the Comprehensive Annual Financial Report (CAFR). Cheryl Ferrara/Eagle Correspondent

As a member of the Audit Advisory Committee, James Conway, Jr., participates in discussion of risk management Tuesday. Seated beside Conway in blue is Ed Walsh. Cheryl Ferrara/Eagle Correspondent

MARCO ISLAND - In today’s volatile society, risk management policies are now current strategies for government. On Tuesday, Marco Island’s Audit Advisory Committee discussed asking City Council to consider developing its own.

The policies would identify thresholds of risk in all areas of operation, not just financial, said Jim Conway, Jr., a member of the committee. Guillermo Polanco, interim city manager, and Marco Island City Councilor Joe Batte, who attended the meeting, agreed it could be a good first step.

“It starts at the top, at City Council,” said Conway. “It’s as much a management attitude as a real life position.” The city is currently considering an independent internal auditor who would answer to council, or possibly an advisory committee, and not to city management.

The move would not require additional staff but would be a reclassification of an existing position, Polanco said.

In a draft proposal, committee members underscored the pervasiveness of risks, both quantifiable and subjective, the city faces. When the plan is refined, it will be presented to council, Chairman Bill Schroeder said.

It also will be placed in the committee’s future objectives. The group plans to propose taking an advisory role in assisting council if council desires.

Schroeder asked the question: “What threshold of risk are we (the city) willing to accept, and what do we do if we are approaching that threshold?”

Committee member Ray Rosenberg gave an example. The city posted decreasing speed limits on Collier Boulevard up to the Smokehouse Bridge to increase safety in the area, but if drivers do not comply and police do not enforce lower speeds, then the risk is actually not diminished.

Thinking critically about city decisions would be one area affected by risk management policies.

The committee agreed the city’s risks would have to be evaluated by department and by someone knowledgeable about procedures within its workings. After identification, a risk level would be assigned to each element and a method of quantifying results would be established.

Internal controls would be set to maintain an acceptable level of exposure or to trigger response if that risk were approaching an assigned threshold.

“It’s the reason several years ago we formed the Audit Advisory Committee,” said Batte addressing the group. “I have a strong feeling my brothers on council will agree with me and be excited about it.”

The committee also heard a report from Maudlin & Jenkins, the auditors completing the city’s Comprehensive Annual Financial Report (CAFR). Leanne Cross and Jeff Gerhard were visiting City Hall to collect data for testing.

Cross reported the capital assets audit was close to completion.

On the general ledger, Cross said two sizable adjustments were made after closing Fiscal Year 2013’s books. Polanco explained the adjustments.

The first corrected spreadsheet entries for employee’s personal leave accruals. Polanco said during standard entry procedures, wrong data was inadvertently picked up from the prior year, requiring a $500,000 adjustment.

The second was $80,000 of capitalized interest that had not been recorded.

The committee asked if the city’s efforts to eliminate computer access for terminated employees were working properly.

In 2012, auditors marked down the city, assigning a significant deficiency for allowing terminated employees to continue accessing city IT programs. The same problem was noted on the FY2011 audit.

Cross said her company had not tested to see if new controls were working but would review them as the audit progressed.

Auditors hope to complete their work by mid-February. Cross said her company had not uncovered any surprises to date, but auditors were still completing fieldwork and had not tested the data collected thus far.